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Want to Save on Health Care Spend on Health Care

January 14, 2008
Related Topics: Medical Benefits Law, Benefit Design and Communication, Workforce Planning, Latest News
If corporate CFOs are looking for a way to fight ballooning health care costs, they might actually want to consider one relatively quick fix: spend more money on health care.

While it sounds counterintuitive at first, experts in the health care industry are suggesting that companies that implement wellness programs are now starting to show returns on those investments, specifically in the form of lower health care costs.

“CFOs have always viewed health care as an expense, but rarely as an investment” said Jerry Ripperger, director of consumer health at the Principal Financial Group. “But improving the health of your employee base, rather than simply providing reimbursements, is an exercise in risk management with a true ROI.”

The types of wellness programs may vary—generally they aim to get employees going to the doctor less by improving their overall health—but  Ripperger said that the returns on such programs tend to be consistent across the board.

He pointed out that a recent study by Principal—one the company had validated by benefits consulting and actuarial firm Milliman—found that for every dollar spent on putting a wellness program in place, employers have seen an average reduction of $2.45 in medical claims. Generally,  Ripperger added, it takes about 18 months for an employer to start seeing such returns, noting that the longer a wellness program is in place, the more health care costs can be reduced.

While  Ripperger said it’s difficult to pinpoint the exact cost of a wellness program, they are often less than 5 percent of a company’s total health care costs.

On average, health care for a family runs about $12,100 a year—with employers picking up 72 percent of the bill, according to the Kaiser Family Foundation’s 2007 annual report on employer health benefits.

Kaiser research also shows that companies tend to implement a wide range of wellness programs, although they are still utilized by only a small minority of corporations. Specifically, 19 percent of companies offer injury prevention programs, while 10 percent offer fitness programs, 9 percent have smoking cessation programs and only 6 percent offer weight-loss programs, according to the Kaiser Foundation.

Filed by Mark Bruno of Financial Week, a sister publication of Workforce Management. To comment, e-mail

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